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    TEL
    Earnings call· Jun 2026(Q3 FY26)

    TE Connectivity plc TEL

    Jul 22, 2026 Source

    Executive summary

    TE Connectivity Q3 FY26 — Record Orders and AI-Driven Outperformance

    TE Connectivity delivered a strong Q3 FY26, driven by strategic positioning in accelerating data and power trends, particularly AI infrastructure. Record order momentum and growing backlog provide increased visibility into continued broad-based growth for FY27, reinforcing confidence in long-term earnings compounding. The company also announced a strategic bolt-on acquisition to expand its power and filter product portfolio.

    Highlights

    5

    • Sales increased 14% reported and 12% organically year-over-year to $5.2 billion.

    • Record orders of $5.7 billion, up 27% year-over-year and 7% sequentially, with double-digit growth in every business.

    • Adjusted EPS grew 22% to a record $2.94, with adjusted margins expanding 90 basis points.

    • Year-to-date free cash flow reached $2.2 billion, demonstrating strong cash generation.

    • Industrial segment sales grew 22% reported and 21% organically, led by over 30% organic growth in DDN and Energy businesses.

    Concerns

    2

    • Global vehicle production is expected to be slightly down this year, impacting the Automotive segment.

    • Restructuring charges of $83 million were incurred in the quarter, with full-year fiscal '26 expected to be roughly $100 million.

    Guidance & targets

    12
    CategoryTargetConfidence
    Full-year FY26 Sales Growth
    approximately 15%
    high materiality
    High
    Full-year FY26 Adjusted EPS Growth
    above 20%
    high materiality
    High
    Q4 FY26 Sales
    approximately $5.25 billion
    high materiality
    High
    Q4 FY26 Adjusted EPS
    approximately $3.05
    high materiality
    High
    Full-year FY26 Sales Growth
    15%
    high materiality
    High
    Full-year FY26 Adjusted EPS Growth
    23%
    high materiality
    High
    Q4 FY26 Adjusted Effective Tax Rate
    between 22% and 23%
    medium materiality
    High
    Full-year FY26 Free Cash Flow Conversion
    roughly 100%
    medium materiality
    High
    Full-year FY26 Restructuring Charges
    roughly $100 million
    medium materiality
    High
    Energy Business Growth
    mid-teens grower
    medium materiality
    High
    Automotive Content Outperformance
    4- to 6-point range
    medium materiality
    High
    AI Cloud Revenue Target
    ahead of $3 billion
    high materiality
    High

    Segment performance

    8
    SegmentRevenueYoYQoQMargin
    Industrial Solutions
    Broad-based growth across the segment, led by Digital Data Networks (DDN) and Energy businesses. Benefiting from AI infrastructure and power investment cycles. Medical sales were as expected.
    DDN organic growth: >30%Energy organic growth: >30%Automation and Connected Living sales growth: 16% reported (14% organic)Aerospace and Defense sales growth: 12%
    		$2.6B22% reported, 21% organically—nearly 23% adjusted operating margin
    Digital Data Networks (DDN)
    Delivered a very strong quarter, sales up sequentially in line with expectations. Increasing demand as AI architectures evolve towards agentic workloads, driving greater deployment of CPUs and networking. Growing opportunities in power connectivity.
    		—34%$100 million sequential increase—
    Energy
    Very strong sales growth driven by continued investment across grid hardening and data center build-outs. AI opportunity extends beyond the rack, with significant investment across power infrastructure. Expected to be a mid-teens grower this year and next.
    		—33% organic——
    Automation and Connected Living (ACL)
    Growth across every region. Seeing additional indicators of both cyclical growth and content outperformance. Expects market to grow high single digits this year, with TE outperforming.
    		—16% reported, 14% organic——
    Aerospace and Defense
    Reflects continued strength in both commercial aerospace and defense markets, where data connectivity and power products are essential to next-generation platforms.
    		—12%——
    Transportation Solutions
    Growth driven by content outperformance in end markets, particularly in Asia. Demonstrated resiliency in execution.
    		$2.6B7% reported, 5% organically—21% adjusted operating margin
    Automotive
    Delivering growth above the market due to content drivers despite a decline in vehicle production. Data connectivity, electrification of the powertrain (especially in Asia), and software-defined vehicle architectures are key drivers. Content outperformance expected to be in the 4- to 6-point range.
    		—5% reported, 3% organically——
    Commercial Transportation
    Seeing improving cycle trends across regions and market verticals. Delivering significant growth above the market through new program wins, further electrification of trucks in Asia, and strong execution.
    		—20% reported, 18% organically——

    Operational metrics

    14
    Sales
    $5.2 billion14% reported YoY, 12% organically YoY
    Q3 FY26

    Evenly split between Industrial and Transportation segments.

    Adjusted EPS
    $2.9422% YoY
    Q3 FY26

    Record adjusted EPS.

    Adjusted Operating Margin
    21.9%90 bps YoY expansion
    Q3 FY26

    Reflects continued execution and managing inflationary pressures.

    GAAP Operating Income
    $981 million
    Q3 FY26

    Components included in GAAP operating income.

    GAAP EPS
    $2.55
    Q3 FY26

    Adjustments to GAAP EPS.

    Adjusted Effective Tax Rate
    23%
    Q3 FY26

    Cash tax rate expected to remain well below this rate.

    Capital Returned to Shareholders
    $2 billion
    YTD FY26

    Through dividends and share buybacks.

    AI Revenue as % of DDN
    continuing to increase
    Q3 FY26

    Was 70% a few quarters ago; continues to go up as AI accelerates.

    AI Revenue Split
    1/3 power connectivity, 2/3 data connectivity
    Q3 FY26

    Reflects the composition of TE's AI-related business.

    Power Content Increase Potential
    1.5xvs traditional power content
    future

    Potential content increase with higher-voltage architectures.

    China Auto Production
    down 2%YoY
    Q3 FY26

    Similar to global picture; offset by exports.

    China Auto Business Growth
    6%vs 2% production decline
    Q3 FY26

    Outperformance driven by exports from China OEMs.

    European Auto Business Outperformance
    4 pointsabove market
    Q3 FY26

    Offsetting weak North American market.

    Energy Business Growth Contribution
    well over $100 million
    Q3 FY26

    Contribution to the company's total organic growth, which was approximately $600 million in the quarter.

    Industry KPIs

    9
    MetricValueDetails
    M a contributionAstrodyne TDI: >$250 millionUSD
    Orders book to bill1.1
    Segment revenue growthIndustrial Solutions: 22% reported, 21% organic; Transportation Solutions: 7% reported, 5% organic%
    Content per device per vehicle4- to 6-point rangepoints
    Design wins product cycle ramps—
    Order visibility backlog policyrecord backlog position
    Capacity expansion internal sourcing—
    End market revenue mix organic growth—
    Operating margin incremental leverage21.9%%

    Orderbook & backlog

    7
    Total Orders$5.7 billionQ3 FY26

    27% YoY, 7% sequential

    Record order levels, with double-digit growth in every business. Provides increasing visibility into FY27.

    Industrial Segment Ordersincreased 36%Q3 FY26

    YoY

    Driven by increasing momentum in AI and strong growth in every business within the segment.

    Transportation Segment Ordersincreased 19%Q3 FY26

    YoY

    Reflecting continued content growth in both automotive and commercial transportation.

    Digital Data Networks (DDN) Ordersup over 70%YTD FY26

    YoY

    Strong momentum in AI, building backlog for program ramps into next year.

    Energy, Aerospace & Defense, Automation & Connected Living Orders20% order growthYTD FY26

    YoY

    Reflects strong secular growth trends in these businesses.

    Book-to-Bill Ratio1.1Q3 FY26

    Applies to both the quarter and year-to-date. Orders have translated into strong growth and a record backlog position.

    Record Backlog PositionRecord levelQ3 FY26

    Strong growth indicator for fiscal 2027, influenced by AI program wins within the DDN business.

    Deals & partnerships

    2
    Astrodyne TDIBolt-on acquisition broadening portfolio of power and filter products for mission-critical applications.$1.4 billion (purchase price)

    Will be part of the Industrial segment. Has a strong position in power filters and custom power supplies, serving semiconductor equipment, defense, and medical markets. Funded through cash.

    Ram PhotonicsAcquisition to strengthen optical roadmap with fiber attached connectivity.

    Investment in scaling manufacturing and engineering teams to meet customer intercept points.

    Risks & headwinds

    2
    Global vehicle production declineFY26, similar next year

    down slightly this year

    Mitigation: TE's content outperformance (4-6 points) above production; strong performance in Asia and Europe offsetting weak North American market.

    Weakness in China domestic auto marketQ3 FY26

    China auto production down 2%

    Mitigation: Strong exports from China OEMs (to Southeast Asia, Central/South America, Africa, Europe) are offsetting domestic weakness, leading to 6% growth for TE's China business.

    What to watch in Q4 FY26

    5

    DDN Revenue Growth

    Next quarter (Q4 FY26 results, impacting FY27 outlook)
    Currenton track to what we said 90 days ago
    TargetContinued strong growth, with AI percentage increasing

    Why it matters

    DDN is a key driver of AI-related growth and overall industrial segment performance.

    When you think about what we think about DDN and where AI is we're on track to what we said last quarter for DDN, DDN will be exactly where we thought we were going to be. And when you look at it, because of the AI momentum and the orders that we see, all you're going to continue to see is the percentage of AI of DDN is just continuing to increase.

    Q&A highlights

    5

    Inquires about the scaling of the FAU optical business, its importance in the copper vs. optical debate, and TE's capabilities.

    Terrence clarifies that copper will remain the heavy workload within the rack for agentic workloads, while optical (FAU from Ram Photonics) opens incremental market access for scale-out and off-switch applications. He notes that meaningful revenue from FAU is expected from 2028 onwards, representing an incremental TAM.

    “meaningful revenue until we get to '28 and beyond that. But it's an incremental TAM, Scott. And it builds on the copper position, and it's going to add incremental revenue in TAM for us as we go forward.”

    asked by Scott Davis · answered by Terrence Curtin

    2 min read5 chapters

    Detailed Narrative

    01

    Strategic Positioning and AI Infrastructure

    TE Connectivity's strategy around accelerating data and power trends is driving broad-based outperformance, positioning the company at the intersection of major technology and infrastructure investment cycles. Investments in AI infrastructure are driving strong growth in Digital Data Networks (DDN) and Energy businesses, while secular trends like electrification and automation benefit Aerospace & Defense, Automation & Connected Living, Automotive, and Commercial Transportation.

    02

    Order Momentum and Backlog

    The company achieved record order levels of $5.7 billion, growing 27% year-over-year, with double-digit order growth across every business. This strong order momentum has resulted in a record backlog position, providing increasing visibility into continued broad-based growth for fiscal year 2027. The book-to-bill ratio was 1.1 for both the quarter and year-to-date.

    03

    DDN and Energy Growth Drivers

    The Industrial segment, particularly DDN and Energy, is benefiting significantly from AI infrastructure build-outs. DDN sees increasing demand as AI architectures evolve towards agentic workloads, driving greater deployment of CPUs and networking, increasing the addressable market for high-speed copper connectivity. The Energy business is growing due to grid hardening, utility modernization, and data center power infrastructure investments, with about one-third of its growth linked to data center build-outs.

    04

    Optical Connectivity and Power Solutions

    TE is expanding its optical roadmap through the Ram Photonics acquisition, strengthening its position in fiber-attached connectivity for long-term growth opportunities, particularly as optics move off the switch in data center architectures. The company is also well-positioned in power connectivity as the industry shifts to higher-voltage architectures, leveraging expertise in material science, thermal management, and safety. Meaningful revenue from the FAU optical business is expected from 2028 onwards, representing an incremental total addressable market (TAM).

    05

    Astrodyne TDI Acquisition

    TE signed an agreement to acquire Astrodyne TDI for approximately $1.4 billion, a bolt-on acquisition expected to generate over $250 million in annual sales. This acquisition broadens TE's portfolio of power and filter products for mission-critical applications, particularly in semiconductor equipment, defense, and medical markets, and is expected to be accretive to growth rates and margins.

    AI-generated summary of the company’s earnings call. Not investment advice.